Tolls (Severn Bridges)

Norman Baker Excerpts

Wednesday 23rd June 2010 Westminster Hall

[The Parliamentary Under-Secretary of State for Transport (Norman Baker)]

I wish first to congratulate the hon. Member for Newport East (Jessica Morden) on securing the debate. I thank her very much for her kind welcome to me in my new post. Our commitment to the issue is not in doubt, and I hope that the fact that it is taking place during another event outside the House demonstrates to her constituents her dedication to the issue—assuming, of course, that they will support England.

Before I start to discuss the tolls on the Severn crossings, I wish to make the point that, since 1945, it has been the policy of successive Governments that crossings on estuaries should be paid for by the user rather than by the taxpayer. Successive Governments have taken the view that tolls on all such crossings are justified because the user benefits from the exceptional savings in time and money that those expensive facilities make possible. It is important to make such a point at this stage. It is one that should not be forgotten, not least of all with the present financial difficulties that the Government and country face.

In specific relation to the Severn crossings, it might be helpful if I give a brief outline of their history, some of which is relevant to the issues that have been raised. The first Severn bridge was opened by the Queen in September 1966, providing a direct link from the M4 motorway into Wales, with a toll in place for use of the bridge to pay for the cost of construction. The original bridge continually operated at significantly above its designed traffic capacity, so the then Government said in 1986 that a second bridge would be constructed. In July 1988 they announced that the private sector would be given an opportunity to participate in the scheme and in April 1990 they announced the selection of the bid led by John Laing Ltd with GTM-Entrepose to design, build and finance the second crossing. That consortium was also to take over the maintenance and operation of the existing Severn bridge.

In October of that year, the concession agreement was formally signed between the Government and Severn River Crossing plc, and in February 1992 the Severn Bridges Bill received Royal Assent. The concession agreement was enshrined in an Act of Parliament and commenced in April 1992. Severn River Crossing plc then took over both the operation and maintenance of the present bridge and the construction of the new bridge. The finance arranged by the company covers the cost of construction for the new bridge and pays for the outstanding debt on the present bridge.

Construction of the new bridge started in September 1992 and the new crossing was opened on 5 June 1996 by the Prince of Wales, almost 30 years after the opening of the first bridge. The concession period is limited to a maximum of 30 years. The actual end date will be achieved when the concessionaire has collected a fix sum of money from tolls, which is £995,830,000 at 1989 prices; that is £1.8 billion at today’s prices. As part of the concession agreement, Severn River Crossing plc is authorised to collect tolls to meet its financial obligations. It is worth stressing that that is the company’s only source of income.

Let me make it clear why tolls are collected at the crossings. Tolls are in place to repay the construction and financing costs of the second Severn crossing, the remaining debt from the first existing crossing from 1992 and to maintain and operate both crossings. I have seen no evidence to suggest that the tolls impact on the economic viability of Wales, although I note the concerns of hon. Members about the impact of the tolls in their constituencies. Clearly, there is a cost to the crossing, which is borne by business and those who pay the tolls, but that has to be weighed against the benefits that the crossings provide in terms of more direct access into Wales, allowing users quicker access to markets than would otherwise be the case. However, I am happy to receive and to look at evidence from the Welsh Assembly, hon. Members or others. That is an open invitation to supply such information to me.

[Nia Griffith]

Does the Minister agree that in a situation where tolls are not the norm on other roads, it makes a firm such as Owens feel at a distinct disadvantage when it is competing with firms whose distances from the main markets and from the channel ports may be similar, but who do not have to make their route via a tollbridge, and that there is therefore a feeling of economic inequality in that instance?

[Norman Baker]

I do understand that. I mentioned earlier that it is standard practice for estuary crossings to have tolls, no matter where they are. They limit the journey time and deal with—or compensate for—the geography of the area. While I understand that there is a cost involved that would not be there if a crossing were not necessary, the alternative to a toll crossing would be a much longer diversionary route. That is a matter of geography; I am not downplaying the concerns that hon. Members and others have about the impact. As I said, I welcome any further information that they want to give me on that matter, and I will personally look at it.

[Jessica Morden]

Would the Minister commit to doing an economic impact study on south Wales with the Welsh Assembly Government?

[Norman Baker]

I do not want to commit to that here, but I will happily receive information that is supplied to me, and I will bear in mind that request as and when it comes in.

The Severn Bridges Act 1992 seeks to apply a clear structure to the tolls to give the concessionaire confidence that it will be able to meet its liabilities and manage the risks that it accepted through the concession agreement. The toll levels were set for three categories of vehicles at the time of tender and are embodied in the Act. The Act sets out the tolling arrangements and the basis for yearly increases in the toll rates. Toll rates are fixed in real terms. The new rates are introduced on 1 January each year and are increased in line with the retail price index using a formula, and rounded to the nearest 10p.

I want to stress an important point: the Secretary of State does not have the authority to set the annual tolls below the level of RPI increase without the concessionaire's agreement. The concessionaire would not be able to agree to anything that would affect their net revenue without compensation and agreement from their shareholders and lenders, which would result, if such an agreement were forthcoming, in a cost to the taxpayer.

Tolls are charged in a westbound direction only from England into Wales. The current toll prices are: £5.50 for cars, £10.90 for vans and £16.40 for vehicles over 3.5 tonnes. I do understand hon. Members’ concerns that those are higher than apply in other crossings.

[Paul Murphy (Torfaen) (Lab)]

The Minister made reference to the fact that it is an estuarial crossing, but it is unique in the United Kingdom because it goes into a part of our country that now has a devolved Government. When I served as Secretary of State, some of my conversations with the then First Minister were about how we deal with a situation where tolls are charged to come into Wales but not to go out. The impact on the Welsh economy is very severe, particularly in times such as this. The Minister ought to think a little more about the importance of having a dialogue with his counterpart in Cardiff, because of the importance of this to the Welsh economy in these difficult times.

[Norman Baker]

I am very happy to have dialogue with my counterpart or anyone else in the Welsh Assembly if they wish to do so. The issue has just been raised for the first time with the new Government—this is the first Adjournment debate on it. I am perfectly open to suggestions of dialogue with people from Wales or elsewhere on issues for which my Department is responsible.

I want to talk about VAT, which was raised by the hon. Member for Newport East. When VAT was first applied to the crossings in 2003, following a European Court ruling, there was no increase in the toll to the motorist. Following the Chancellor's statement yesterday, the Highways Agency will discuss adjustments within the concession to accommodate the new 20% VAT rate with Severn River Crossing plc. We do not expect the VAT increase to be passed on through an increase in the tolls, but the concessionaire expects to receive a certain amount of money, and the way in which that can be accommodated without increasing tolls is a matter for negotiation.

I know that the hon. Member for Newport East has an interest in local discount schemes, to which she referred in her opening remarks. Any discounts or exemptions are a matter for the concessionaire to decide, provided that they comply with existing legislation. Where that is not the case, such schemes cannot be introduced without changes to primary legislation and the concession agreement. They would have a financial impact on the concession and the period required for repayment, which would impact all road users. Discounts of around 20% for regular and frequent users are offered by way of a season TAG, whereas blue badge holders and the emergency services are exempt.

I now turn to the matter of card payments, which I know the hon. Lady pursued before the election and, with some justification, can claim to have had some success on in her campaign. In March this year, an amendment was made to the Severn Bridges Regulations 1996 to allow card payments at the tollbooths. She will recognise that there are associated costs with the introduction of card payments, mainly bank transaction charges, which are estimated to be between £7 million and £10 million to the end of the concession, or approximately £1 million per year depending on usage. Implementation is expected to cost around £1.2 million, and the way in which the additional costs will be funded has yet to be agreed. Discussions with the concessionaire to resolve the financial issues regarding the introduction of credit card payments are ongoing, but work to amend the tolling software to allow for the processing of credit and debit cards has started.

One of the drivers—no pun intended—that the hon. Lady will be aware of is the Ryder cup, one of the highest profile sporting events in the world. It is due to be held in Newport between 27 September and 3 October this year, with about 50,000 visitors a day, the majority of whom will come from overseas and will not be flush with money in their pockets to pay the tolls. We want to make progress on the matter, and I hope to have it resolved before the Ryder cup begins. My officials assure me that that will be the case, and I will look into the matter to ensure that that is so.

An hon. Member also raised the issue of motorists being sent back after driving some way and finding that they could not pay by card. I understand that signs are in place close to the bridge, before the last junction, advising motorists of the current arrangements, which is that they can pay only in cash. However, if they arrive at the tolls, I have been assured that they do not necessarily have to make a U-turn; they can be issued with an invoice with an added administration fee of £5. The problem with turning motorists back has been recognised, and that is being dealt with in the way I described as an interim measure. If that was new information to Members present, I hope that that was helpful.

Regarding maintenance, the concessionaire is required to maintain both Severn crossings in accordance with the concession agreement. A rigorous schedule of inspections is carried out and regular review meetings are held between the concessionaire and the Highways Agency.

A programme of cable inspections on the first Severn bridge began in April 2006 after corrosion was found in the suspension cables of bridges of a similar age and construction in other parts of the world. Unfortunately, significant levels of corrosion were found and a programme of works to tackle the corrosion followed. A full dehumidification system has been installed to address the corrosion. The system, which pumps dry air into the cables to reduce humidity, has been operational since December 2008. Reports show that humidity levels within the main cable are below the target level of 40% relative humidity. In addition, an acoustic monitoring system has been installed to track the rate and location of any further deterioration. A second round of inspections is currently under way to gain a detailed understanding of the level of corrosion and to verify the success of the dehumidification process so far. That work is due for completion later this year.

The corrosion of the main cables is a defect that existed before the letting of the concession and unfortunately—from my point of view—is not covered by the concession agreement. Costs associated with this work will therefore be met by the Government. The programme of mitigation and inspection work carried out so far has cost the Government £15 million, with the second round of inspections costing us a further £4 million.

Reports in the local media—and a letter from a Member of the National Assembly for Wales—suggest that the concessionaire will hand back the crossings in a state of disrepair. The suggestion was made earlier that, once the concession ends, the taxpayer will have to foot the bill. Let me make it clear, the concessionaire is bound by the legal terms of the concession, which it signed, to maintain the crossings to an acceptable standard. When the concession ends, the concessionaire is required to carry out any necessary maintenance and repair works on the crossings prior to handover. That is a legally binding commitment and is what I expect them to do.

[Jessica Morden]

Does the Minister have an indication of the year in which the concession will end?

[Norman Baker]

I am coming to that. The concession agreement sets out the requirements for transfer of the crossings to the Secretary of State at the end of the concession period. The concession is currently predicted to end in the first half of 2017, when the sum defined in the 1992 Act will have been collected through tolling. The bridges will then be returned to the Secretary of State. However, in order to ensure that tolls do not rise further, there are additional costs that have to be absorbed, both through the VAT increase and the work to ensure that credit cards can be accepted. I am giving the best estimate—it might slip slightly in the light of those two matters, but that is not certain at this stage.

[Jonathan Edwards]

Will the Minister indicate whether the UK Government are considering offering joint ownership of the bridges after handover to the Welsh Government?

[Norman Baker]

That matter has not been considered in my short time in office. The hon. Gentleman has raised an issue that I am sure is important to people in Wales and I will ensure that he receives a reply.

[Jonathan Evans]

The Minister shared with us a figure of £995 million. As I understand it, when we last heard from the Department, the assessment of how much mileage has been made towards that figure was about £682 million. Is the Minister able to update us on the current take, or if not, will he share it later?

[Norman Baker]

I do not have that precise figure at my fingertips, but if comes to me in the next couple of minutes I will tell Members. If it is not possible to do so before half-past 4, I undertake that all Members present will get a written response.

When the Secretary of State takes over the bridges at the end of the concession, the Government are authorised to continue tolling for a further five years following the handover of the crossings, to enable them to cover their own costs incurred, such as the £19 million that I mentioned in respect of the maintenance of the cables. No decisions have been made regarding the operation of the crossings once the concession ends, and therefore we are open to suggestions as to what might be the appropriate position at that stage.

In answer to the question about turnover at July 1989 prices, the present figure is about £648 million, against the final total of £995 million.

In conclusion, I thank not only the hon. Member for Newport East but Members of all parties who contributed to the debate. I and the Department recognise that this is an important issue for Welsh Members in particular. We are bound by the 1992 Act and the agreements entered into at that stage. Within that relatively tight constraint, I am willing to do what I can to address issues that Members have raised and I hope the House has found that helpful.